The supplier quotes you USD 5.00 per unit. Freight looks like another USD 0.80. You price the product at USD 12.99 expecting a healthy margin — then the real costs arrive. Duties, brokerage, drayage, handling, insurance, and a surprise customs exam eat another USD 1.50 per unit. Your margin just dropped from 55 percent to 38 percent. This is what happens when you price off the purchase order instead of the landed cost.
Landed cost is the only number that matters for pricing, margin analysis, and sourcing decisions. This guide breaks it into components, gives you the formula, walks through a real example, and shows you where importers consistently leave money on the table.
The landed cost formula
At its simplest:
Landed Cost = Product Cost + International Freight + Insurance + Duties + Taxes + Fees + Inland Delivery
Each of those buckets contains sub-items. Let's unpack them.
Component 1 — Product cost
This is the price on your supplier's invoice. The Incoterm determines what is included:
- EXW (Ex Works): Just the product at the factory gate. You pay everything from there.
- FOB (Free on Board): Product + inland transport to the port + export customs clearance + loading onto the vessel. Most China imports are quoted FOB.
- CIF (Cost, Insurance, Freight): FOB + ocean freight + marine insurance to the destination port.
If your quote is FOB, you still need to add freight, insurance, and everything after the port of loading. If it is CIF, you still need duties, taxes, and destination charges. Neither is "landed." See our Incoterms guide for the full breakdown.
Component 2 — International freight
Ocean, air, or rail — the cost of moving goods from origin port to destination port.
- Ocean FCL (20-foot): USD 1,800–3,400 on major Asia–US lanes in 2026
- Ocean LCL: USD 55–95 per revenue ton
- Air freight: USD 3.50–8.00 per kg depending on lane and urgency
- Rail (China–Europe): USD 4,000–6,000 per 40-foot container
Don't forget surcharges: BAF (bunker adjustment), CAF (currency adjustment), peak season surcharge, and congestion surcharges. These can add 10 to 25 percent on top of the base rate. Get an all-in quote from your forwarder or use our shipping estimator.
Component 3 — Insurance
Marine cargo insurance typically costs 0.3 to 0.8 percent of CIF value for standard goods. High-value or fragile goods run 1 to 2 percent. The minimum premium is usually USD 50–100 regardless of shipment size.
Many importers skip insurance on small shipments. This is a mistake — a single lost LCL shipment can wipe out months of margin. Budget 0.5 percent of CIF as a default.
Component 4 — Customs duties
Duties are calculated as a percentage of the customs value (usually CIF for most countries, FOB for the US). The rate depends on:
- The HS code of the product
- The country of origin
- Any trade agreements or preferential tariffs
- Any additional duties (anti-dumping, countervailing, Section 301)
In the US, the customs value is the transaction value (typically FOB) plus assists, royalties, and packing costs. The duty rate comes from the Harmonized Tariff Schedule (HTS). Use our tariff lookup tool to find the rate for your product.
Section 301 tariffs on China (2026)
Most goods from China still carry Section 301 tariffs of 7.5 to 25 percent on top of the normal MFN duty rate. Some categories (EVs, batteries, semiconductors, steel, aluminum) carry even higher rates. These are additive — a product with a 4 percent MFN rate and a 25 percent Section 301 rate pays 29 percent total.
Component 5 — Import taxes
Different countries handle this differently:
- US: No import VAT. Merchandise Processing Fee (MPF) of 0.3464% of value (min USD 31.67, max USD 614.35). Harbor Maintenance Fee (HMF) of 0.125% of value for ocean shipments.
- EU: Import VAT (typically 19–27% depending on member state) on CIF + duty value. Recoverable for VAT-registered businesses but still a cash flow cost.
- UK: 20% import VAT on CIF + duty. Postponed VAT accounting available.
- Canada: 5% GST on duty-paid value. Provincial taxes may apply at point of sale.
- Australia: 10% GST on CIF + duty for goods over AUD 1,000.
Check our import taxes by country guide for detailed rates.
Component 6 — Fees and charges
This is where most importers get surprised. The fee stack for a typical US ocean import:
- Customs brokerage: USD 150–350 per entry
- ISF (Importer Security Filing): USD 35–60
- Customs bond (continuous): USD 300–500/year or single entry USD 50–100
- Port terminal handling (THC): USD 150–300
- Chassis rental: USD 30–75/day
- Container drayage (port to warehouse): USD 300–800 depending on distance
- Warehouse receiving: USD 25–50 per pallet
- Exam fee (if selected): USD 300–1,000+
- Demurrage (if container sits at port): USD 150–350/day after free time
- Detention (if container not returned): USD 100–250/day after free time
Not every shipment hits every fee, but budget for the common ones. A typical small FCL import to the US incurs USD 800–1,500 in destination fees beyond the freight and duty.
Don't forget FX costs. If you pay suppliers via bank wire in a foreign currency, your bank's exchange rate markup (typically 2–4% above mid-market) is a real cost that belongs in your landed cost calculation. On a USD 20,000 order paid in CNY, that's USD 400–800 lost to poor exchange rates. Using a dedicated FX service like Wise Business (0.4–0.7% fee, mid-market rate) can shave a full percentage point off your landed cost.